DOL Makes Proposal to Expand Access to Small Business Health Plans

The U.S. Department of Labor (DOL) announced a Notice of Proposed Rulemaking (NPRM) to expand the opportunity to offer employment-based health insurance to small businesses through Small Business Health Plans, also known as Association Health Plans.

The regulation would modify the definition of “employer,” in part, by creating a more flexible “commonality of interest” test for the employer members than the DOL had adopted in sub-regulatory interpretive rulings under the Employee Retirement Income Security Act (ERISA) section 3(5).

The rule would:

• Allow employers to form a Small Business Health Plan on the basis of geography or industry. A plan could serve employers in a state, city, county, or a multi-state metro area, or it could serve all the businesses in a particular industry nationwide; and
• Allow sole proprietors to join Small Business Health Plans, clearing a path to access health insurance for the millions of uninsured Americans who are sole proprietors or the family of sole proprietors.

The DOL says these improvements stand to open health insurance coverage for millions of Americans and their families by making it more affordable for thousands of small businesses and sole proprietors. By joining together, employers may reduce administrative costs through economies of scale, strengthen their bargaining position to obtain more favorable deals, enhance their ability to self-insure, and offer a wider array of insurance options.

The agency notes that Small Business Health Plans (Association Health Plans) cannot charge individuals higher premiums based on health factors or refuse to admit employees to a plan because of health factors. The Department of Labor’s Employee Benefits Security Administration will closely monitor these plans to protect consumers.

The NPRM will be published in the Federal Register on January 5, and be available for public comment for 60 days. Text of the NPRM is here.